House File 257 - Introduced HOUSE FILE 257 BY RIZER , PETTENGILL , HEATON , HEIN , and STAED A BILL FOR An Act modifying the criteria for claiming the deduction 1 from the individual income tax, corporate income tax, 2 and franchise tax of certain wages paid relating to the 3 employment of an individual with a disability, and including 4 effective date and retroactive and other applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1524YH (6) 86 mm/sc

H.F. 257 Section 1. Section 422.7, subsection 12, paragraph a, 1 unnumbered paragraph 1, Code 2015, is amended to read as 2 follows: 3 If the adjusted gross income includes income or loss from 4 a small an eligible business operated by the taxpayer, an 5 additional deduction shall be allowed in computing the income 6 or loss from the small eligible business if the small eligible 7 business hired for employment in the state during its annual 8 accounting period ending with or during the taxpayer’s tax year 9 any of the following: 10 Sec. 2. Section 422.7, subsection 12, paragraph c, 11 subparagraph (2), subparagraph division (a), unnumbered 12 paragraph 1, Code 2015, is amended to read as follows: 13 “Small “Eligible business” means a profit or nonprofit 14 business, including but not limited to an individual, 15 partnership, corporation, joint venture, association, or 16 cooperative, to which the following apply: 17 Sec. 3. Section 422.7, subsection 12, paragraph c, 18 subparagraph (2), subparagraph division (a), subparagraph 19 subdivision (ii), Code 2015, is amended to read as follows: 20 (ii) It has twenty five hundred or fewer full-time 21 equivalent positions and not more than the equivalent of three 22 twenty-one million dollars in annual gross revenues as computed 23 for the preceding fiscal year or as the average of the three 24 preceding fiscal years. 25 Sec. 4. Section 422.7, subsection 12, paragraph c, 26 subparagraph (2), subparagraph divisions (b) and (c), Code 27 2015, are amended to read as follows: 28 (b) “Small “Eligible business” includes an employee-owned 29 business which has been an employee-owned business for less 30 than three years or which meets the conditions of subparagraph 31 division (a), subparagraph subdivisions (i) through (iii). 32 (c) For purposes of this definition, “dominant in its 33 field of operation” means having more than twenty five hundred 34 full-time equivalent positions and more than three twenty-one 35 -1- LSB 1524YH (6) 86 mm/sc 1/ 4

H.F. 257 million dollars in annual gross revenues, and “affiliate or 1 subsidiary of a business dominant in its field of operation” 2 means a business which is at least twenty percent owned 3 by a business dominant in its field of operation, or by 4 partners, officers, directors, majority stockholders, or their 5 equivalents, of a business dominant in that field of operation. 6 Sec. 5. Section 422.35, subsection 6, paragraph a, 7 unnumbered paragraph 1, Code 2015, is amended to read as 8 follows: 9 If the taxpayer is a small an eligible business corporation, 10 subtract an amount equal to sixty-five percent of the wages 11 paid to individuals, but not to exceed twenty thousand dollars 12 per individual, named in subparagraphs (1), (2), and (3) who 13 were hired for the first time by the taxpayer during the tax 14 year for work done in this state: 15 Sec. 6. Section 422.35, subsection 6, paragraph c, 16 subparagraph (2), subparagraph division (a), unnumbered 17 paragraph 1, Code 2015, is amended to read as follows: 18 “Small “Eligible business” means a profit or nonprofit 19 business, including but not limited to an individual, 20 partnership, corporation, joint venture, association, or 21 cooperative, to which the following apply: 22 Sec. 7. Section 422.35, subsection 6, paragraph c, 23 subparagraph (2), subparagraph division (a), subparagraph 24 subdivision (ii), Code 2015, is amended to read as follows: 25 (ii) It has either twenty five hundred or fewer full-time 26 equivalent positions or not more than the equivalent of three 27 twenty-one million dollars in annual gross revenues as computed 28 for the preceding fiscal year or as the average of the three 29 preceding fiscal years. 30 Sec. 8. Section 422.35, subsection 6, paragraph c, 31 subparagraph (2), subparagraph divisions (b) and (c), Code 32 2015, are amended to read as follows: 33 (b) “Small “Eligible business” includes an employee-owned 34 business which has been an employee-owned business for less 35 -2- LSB 1524YH (6) 86 mm/sc 2/ 4

H.F. 257 than three years or which meets the conditions of subparagraph 1 division (a), subparagraph subdivisions (i) through (iii). 2 (c) For purposes of this definition, “dominant in its 3 field of operation” means having more than twenty five-hundred 4 full-time equivalent positions and more than three twenty-one 5 million dollars in annual gross revenues, and “affiliate or 6 subsidiary of a business dominant in its field of operation” 7 means a business which is at least twenty percent owned 8 by a business dominant in its field of operation, or by 9 partners, officers, directors, majority stockholders, or their 10 equivalents, of a business dominant in that field of operation. 11 Sec. 9. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 12 immediate importance, takes effect upon enactment. 13 Sec. 10. APPLICABILITY. This Act applies to individuals 14 with a disability hired on or after the effective date of this 15 Act. 16 Sec. 11. RETROACTIVE APPLICABILITY. This Act applies 17 retroactively to January 1, 2015, for tax years beginning on 18 or after that date. 19 EXPLANATION 20 The inclusion of this explanation does not constitute agreement with 21 the explanation’s substance by the members of the general assembly. 22 This bill modifies the criteria for claiming the deduction 23 from the individual income tax, corporate income tax, and 24 franchise tax of certain wages paid relating to the employment 25 of an individual with a disability. 26 Under current law, a business that has 20 or fewer full-time 27 equivalent employees, or that has not more than $3 million 28 in annual gross revenues, may claim a deduction equal to 65 29 percent of the wages paid to an individual with a disability 30 that was hired during the year. The bill amends these 31 eligibility criteria to provide that a business that has 500 32 or fewer full-time equivalent employees, or that has not more 33 than $21 million in annual gross revenues, may qualify for the 34 deduction. The bill changes the name of a business meeting the 35 -3- LSB 1524YH (6) 86 mm/sc 3/ 4

H.F. 257 criteria for the deduction from “small business” to “eligible 1 business”. 2 Also under current law, the deduction excludes a business 3 that is an affiliate or subsidiary of a business dominant in 4 its field of operation. The bill amends the definition of 5 “dominant in its field of operation” from a business having 6 more than 20 full-time equivalent employees and more than $3 7 million in annual gross revenues, to a business having more 8 than 500 full-time equivalent employees and more than $21 9 million in annual gross revenues. 10 The bill takes effect upon enactment and applies to 11 individuals with a disability hired on or after that date. The 12 bill applies retroactively to January 1, 2015, for tax years 13 beginning on or after that date. 14 -4- LSB 1524YH (6) 86 mm/sc 4/ 4